Tax Groups

Introduction AWhat Are Tax Groups, And When Can They Be Formed?

Two or more taxable persons who meet certain conditions (see below) may apply to form a “tax group” and then be treated as one taxable person for corporate tax purposes.

To form a tax group, the parent company and its subsidiaries must be resident legal persons, have the same fiscal year, and prepare their financial statements using the same accounting standards.

In addition, to form a tax group, the parent company must fulfill the following:

To own at least 95% of the subsidiary company’s capital.
To own at least 95% of the voting rights in the affiliated company.
To have the right to at least 95% of the profits and net assets of the subsidiary.

Ownership, rights and entitlement may be held either directly or indirectly through subsidiaries. However, a Tax Group cannot include an Exempt Person or a Qualified Person based in the Free Zone.

How Is The Taxable Income For A Tax Group Calculated?

To determine the taxable income of a tax group, the parent company is required to prepare consolidated financial accounts covering each subsidiary that is a member of the tax group for the relevant tax period. Transactions between the parent company and each group member and transactions between group members themselves will be excluded for the purposes of calculating The taxable income of the tax group.